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Outlook
14.
As the Mainland economy continues to expand, it will
remain a driving force for the Asian economy.
A weak US dollar will also help our exports.
With an improving employment situation and the pause
in US interest rate increases, domestic demand looks set
to be the key factor behind economic growth this
year. Nevertheless, there remain a number of
uncertainties in the external economic environment,
such as the increase in global financial market
risks, whether the US property market can achieve a soft landing and the
slowdown in the US economy. We may therefore expect greater
volatility in the financial markets this year.
Overall, however, I am cautiously optimistic about
the economic outlook for 2007.
15.
Taking all these
factors into account, and in the absence of
unexpected serious incidents or major external
shocks, we anticipate that Hong
Kong's
economy will continue to record solid growth in
2007. We forecast GDP to increase by 4.5 to 5.5 per
cent, higher than the average trend growth rate for
the past ten years. As
our economy gathers further strength, the employment
situation should continue to improve.
16.
I am also optimistic
about our economic outlook over the medium term.
Hong Kong will continue to move up the value chain in services
provision, and further consolidate its role as the
financial, trade and logistics centre for the
region. Our
economic integration with the Mainland will also
achieve appreciable synergies. Over the medium term from 2008 to 2011, we
forecast an annual trend growth rate of 4.5
per cent and a 1.5 per cent trend rate of
increase in the GDP deflator. This
means that the forecast trend growth rate of nominal
GDP over the period from 2008 to 2011 is 6 per cent
a year.
17.
The continuous
upgrading of productivity has seen our economy
achieving strong growth whilst keeping our inflation
rate at the relatively low level of 2 per cent
during 2006. The
underlying trend is for a further mild increase in
2007, with the inflation rate forecast to average
3.5 per cent over the following four years.
Yet because of the reduction in public
housing rentals, the implementation of the
Pre-Primary Education Voucher Scheme and the
measures proposed in this Budget, the inflation rate
for 2007 is expected to come down to 1.5 per cent.
Moderate
inflation is generally regarded by economists as a
healthy sign in an economy, and should not be a
cause for concern. The Government will nevertheless keep a close
watch on the inflation trend.
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